Sleep Labs and False Claims Act Violations

Sleeping Disorders and Sleep Labs

The American Academy of Sleep Medicine (AASM) recognizes a
number of different sleep disorders which, taken together, affect
millions of Americans. Some of the most common disorders are
insomnia, narcolepsy/excessive daytime sleepiness, restless leg
syndrome, REM behavior disorders, and obstructive sleep apnea
(OSA).

In particular, OSA is when a patient's airways collapse
during sleep causing an obstruction, and the patient is unable to
push adequate air past the obstruction. Further, there are certain
illnesses referred to as comorbidities which are caused and/or
worsened by OSA. The most common types of comorbidities are heart
disease, high blood pressure, and Type II diabetes.

The most common tool used to diagnose sleep disorders,
particularly OSA, is polysomnographic diagnostic sleep testing
("PSG Test"). The PSG Test is a comprehensive recording of the
biophysiological changes that occur during sleep. For the PSG Test,
a patient will stay overnight at a sleep lab, sleeping with
approximately 30 leads connected to the patient's body to monitor
several body functions, including heart rhythm, breathing, and body
movement.

The result of this PSG Test is known as a polysomnogram. The
polysomnogram is scoredbased on different criteria using the Apnea
Hyponea Index (AHI) or the Respiratory Distress Index (RDI).

In its simplest form, AHI and RDI scores record the average
number of respiratory events meeting specific criteria - apneas
(complete cessation of breathing for 10 or more seconds) or any
hyponeas (partial breathing obstruction for 10 or more seconds) -
experienced by the patient per hour of sleep. The apneas and
hyponeas must meet certain criteria to be scoreable.

An AHI or RDI score of 5-15 events per hour is classified as
mild OSA, 15-30 events per hour as moderate OSA and 30 or more
events as severe OSA. However, if a patient has significant
comorbidities, then a lower AHI or RDI score qualifies the patient
as having moderate or severe OSA.

Once scored, the physician interprets the test and determines
whether to prescribe a subsequent CPAP Titration study ("CPAP
Study") and CPAP equipment, a medical device used to keep a
patient's airway open during sleep so that unobstructed breathing
becomes possible.

The CPAP Study is similar to the PSG Test, except that the CPAP
Study involves the patient wearing the CPAP device, which is a mask
connected to a machine, so that a technologist can determine the
proper settings for the CPAP device to be used at home.

Sleep Labs & The Federal False Claims
Act

Medicare, Medicaid and other federal healthcare programs only
reimburse for medically necessary sleep tests, including PSG
and CPAP tests. [i] The tests are not covered if they are "not
reasonable and necessary for the diagnoses or treatment of illness
or injury or to improve the functioning of a malformed body
member[.]" [ii] Similarly, Medicare only reimburses for medically
necessary CPAP equipment. [iii] Submitting a claim for tests or
equipment that are not "reasonable and necessary" violates the federal False Claims Act.

The federal government has identified fraud related to sleep
testing as a particular area warranting investigation and
oversight. These tests are expensive for the government to
reimburse, with each PSG Test costing the government approximately
$648, each CPAP Test approximately $691, and approximately $88 for
each CPAP device.

In the HHS OIG Work Plan for Fiscal Year 2013, OIG noted that
Medicare reimbursement, totaling approximately $415 million for
sleep tests in 2010, showed high utilization for sleep testing by
sleep disorder clinics. The OIG committed to identifying
questionable billing practices for sleep tests and reiterated that
Medicare will only pay for "reasonable and necessary" sleep
tests.

To be considered "reasonable and necessary," the government has
imposed several requirements. First, Medicare, Medicaid and other
federal health care programs require that polysomnographic sleep
tests be performed only by licensed or certified sleep
technologists (if not by physicians) in order to qualify for
reimbursement for such testing services. [iv] The purpose of this
rule is "to ensure that beneficiaries are receiving the quality of
care that can only be administered by appropriately licensed or
credentialed nonphysician personnel." [v]

Specifically, Medicare only reimburses for sleep tests performed
by nonphysician personnel who possess the appropriate license or
certification by the State, or credentialing by a national
credentialing body:

[a]ny non-physician personnel used
by the IDTF [Independent Diagnostic Testing Facility] to perform
tests must demonstrate the basic qualifications to perform the
tests in question and have training and proficiency as evidenced by
licensure or certification by the appropriate State health or
education department. In the absence of a State licensing board,
the technologist must be certified by an appropriate national
credentialing body. The IDTF must maintain documentation available
for review that these requirements are met. [vi]

Credentialing can also occur because the test is performed in a
sleep center or laboratory accredited by the American Academy of
Sleep Medicine (AASM) or the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO). The American Board of Sleep
Medicine (ABSM) also provides credentialing in sleep technology,
and the National Board for Respiratory Care, Inc. (NBRC) provides
specialty examination for respiratory therapists performing sleep
disorders testing and therapeutic intervention (Certified
Respiratory Therapist-Sleep Disorder Speicalist (CRT-SDS) and
Registered Respiratory Therapist-Sleep Disorder Specialist
(RRT-SDS)). [vii]

Furthermore, federal regulations require that the independent
diagnostic testing facility ("IDTF") certify in its enrollment
application that it has technologists on staff who maintain the
appropriate credentials to perform the services provided, [viii]
and failure to comply may result in the revocation of a providers
billing privileges. [ix]

Second, sleep tests must be performed under an appropriate level
of physician supervision. [x] For most diagnostic tests, including
PSG Tests, "general supervision" by a physician is required. [xi]
Although, to satisfy the criteria for providing "general
supervision," a physician is not required to be present during the
performance of the test, the physician must exercise overall
direction and control over the procedure. Additionally, the
supervising physician is responsible for the training of
nonphysician personnel who actually conduct the tests. [xii]

Third, in order for a CPAP Study to be considered reasonable and
necessary and reimbursed by Medicare, the patient must have
achieved a certain score on the initial PSG Test. To be eligible
for a CPAP Test, a patient must have an AHI or RDI greater than or
equal to 15 events per hour, or an AHI or RDI greater than or equal
to 5 events and less than or equal to 14 events per hour with
documented symptoms of excessive daytime sleepiness, impaired
cognition, mood disorders or insomnia, or documented hypertension,
ischemic heart disease, or history of stroke. [xiii]

Finally, because it constitutes a violation of the Stark Act, [xiv] Medicare prohibits
reimbursement to self-interested CPAP suppliers. CMS prohibits
Medicare payment "to the supplier of a CPAP device if that
supplier, or its affiliate, is directly or indirectly the provider
of the sleep test used to diagnose the beneficiary with obstructive
sleep apnea." [xv] CMS instituted this payment prohibition because
self-interested suppliers are motivated to conduct more sleep tests
than are medically necessary and to interpret the results with a
bias towards prescribing CPAP devices. [xvi]

[iii]
42 C.F.R. § 410.38(a) and
CMS Online Manual 100-2 "Benefit Policy Manual," Chapter 12, §
110.1C (Noting that to be covered by Medicare, the CPAP or BiPAP
device must be "necessary and reasonable for treatment of an
illness or injury" and payment will be barred "for equipment which
cannot reasonably be expected to perform a therapeutic function in
an individual case."

[xiv] The OIG, in its
Semiannual Report to Congress for the period April 1, 2012 -
September 30, 2012 issued on November 2012, 91 rejected a
proposal to create a safe harbor to the Stark Act "protecting
remuneration associated with the distribution of durable medical
equipment by physicians who have been certified by the American
Board of Sleep Medicine to Medicare patients for use in the
treatment of obstructive sleep apnea and a corresponding waiver of
the application of the physician self-referral law."

[xv]
42 C.F.R. § 424.57(f). CMS broadly defines a CPAP device:
"Continuous positive airway pressure (CPAP) device means a machine
that introduces air into the breathing passages at pressures high
enough to overcome obstructions in the airway in order to improve
airflow," This broad definition includes BiPAP devices as well.

[xvi] See73
Fed. Reg. § 69726, 69856-69857 ("We believe that Medicare
beneficiaries and the Medicare program are vulnerable if the
provider of a diagnostic test has a financial interest in the
outcome of the test itself. This creates incentive to test more
frequently or less frequently than is medically necessary and to
interpret a test result with a bias that favors self-interest."